Pharmacy benefit managers have become too powerful
For too long, pharmacy benefit managers have profited at the expense of patients living with chronic conditions. Despite efforts in Washington, D.C., and over 20 states, including Illinois, to address these practices, these benefit managers continue to meddle in our health system, using schemes that worsen or block patient access to care to increase their bottom lines.
Last session, Illinois state lawmakers introduced legislation to better equip the state government to regulate pharmacy benefit manager practices and how they impact patients and local pharmacies.
Health insurance companies hire benefit managers to work between health plans and drug manufacturers to negotiate discounts on medications. As a result, they have become one of the most powerful stakeholders in the health industry. Three pharmacy benefit managers processed 80% of prescription drug claims in 2023.
Based on negotiated prices and rebates, benefit managers dictate, with little transparency or oversight, which medications insurers cover, how much patients pay and which administrative hoops patients and providers must jump through to access prescribed treatments.
Pharmacy benefit managers play an outsized role in determining which medications a patient can access. However, their decisions aren’t always based on the best interest of a patient but instead their own profits.
Benefit manager revenue is directly tied to the list price of medicines, so they can earn more if the list price of the drug is higher. These misaligned incentives sometimes lead to patients footing expensive bills tied to a cost higher than what their own health plan paid for a medication.
Ultimately, these middlemen have financial incentives to prioritize certain drugs, even if those drugs are not the best fit for a patient’s unique needs or their clinician’s recommendation. This limits certain drugs from being available to patients because their health plan doesn’t provide coverage of that medicine.
In Illinois, six common chronic diseases (including cancer and diabetes) affect more than 6.7 million patients. In 2022, more than 36,000 Illinoisans were living with HIV. For these patients and many more, access to provider-prescribed treatments is critical.
When patients faces access barriers, such as out-of-pocket costs becoming too high, they are more likely to abandon their treatment plan, which can lead to higher medical costs for the individual and health system.
Pharmacy benefit managers have long flown under the radar of scrutiny, but lawmakers, regulators and other stakeholders at the state and federal levels are increasingly investigating the role of these middlemen.
Several congressional committees have held hearings to question the largest pharmacy benefit managers on how their practices impact Americans’ access to medicines. The New York Times examined how benefit managers increase the cost of care for patients, employers and the government. And a two-year inquiry into manager practices by the Federal Trade Commission found they hold significant control over medication access and led to a lawsuit against the three largest pharmacy benefit managers for inflating the cost of insulin.
Disappointingly, the end-of-year spending bill Congress passed just recently stripped out the significant pharmacy benefit manager reforms, along with many other health care provisions that were originally included in the spending package. However, Congress will revisit these and other provisions early in 2025.
State lawmakers have recognized the need to address how benefit manager practices negatively impact local patients and businesses. Federal lawmakers in the 119th Congress must pass comprehensive reforms to regulate how benefit managers operate.
Policies to reform the ability of benefit managers to profit from medication list prices and rectify misaligned incentives that lead to increased patient costs are critical to address their predatory role in our health system.
Without action to advance proposals that would help patients better access the medicines they need, patients in Illinois and across the country will continue to be subject to pharmacy benefit managers' “profit over patients” model. In the new year, Congress must act on reform.
Carl Schmid is executive director of the HIV+Hepatitis Policy Institute. George Huntley is a founding member and CEO of the Diabetes Leadership Council.
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